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President Donald Trump has railed against the high price of prescription drugs and famously bemoaned how pharmaceutical companies are “getting away with murder.” Yet, many Americans aren’t seeing a change in what they pay out-of-pocket.

The White House and administration leaders, including Health and Human Services Secretary Alex Azar and Food and Drug Administration Commissioner Scott Gottlieb, say increasing competition is a priority. Gottlieb — whom Trump has called a star — said the FDA has approved a record number of generic drugs and eliminated a backlog in approvals.

The agency is looking for ways to boost price competition for biologics, which are made from natural sources and are among the most expensive drugs on the market. Currently, pharmacists cannot substitute a lower-cost “biosimilar” version when the doctor prescribes a biologic. FDA has proposed “interchangeability” rules that could change the status quo.

The Outlook:

Driving down drug prices through competition may take awhile. That’s because even after gaining FDA approval, generic drugs often have trouble being launched, according to Chip Davis, president of the Association for Accessible Medicines, a trade group for makers of generics and biosimilars. Only three of nine biosimilars approved are available for patients, largely due to patent protections.

We have to get the prices of prescription drugs way down and unravel the tangled web of special interests that are driving prices up for medicine and for really hurting patients.

To say health care is complicated is an understatement. The system that dictates how patients get prescriptions and what they pay includes an array of buyers and payers, such as insurance companies and pharmacy benefit managers. In February, the White House pitched the idea of passing on the discounts and rebates negotiated by PBMs, the financial middlemen between insurers and drugmakers, to seniors who buy drugs through Medicare Part D. This idea, first floated under President Barack Obama’s administration, would mean seniors would pay less out-of-pocket but could also increase premiums if insurers took on added costs.

The Outlook:

Late last year, the administration released a request for public comment on this idea, and pressure is building for the administration to take action. “It’s the one thing you could say that has immediate benefit to consumers,” said John Rother, president of the National Coalition on Health Care. But House Minority Leader Nancy Pelosi said she isn’t convinced much will really change: “At this point, no one is surprised that President Trump has found another reason not to act on prescription drug costs,” Pelosi said in a statement to Kaiser Health News. “While President Trump is making more excuses, Democrats will be discussing real solutions.”

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I have directed my administration to make fixing the injustice of high drug prices one of our top priorities for the year. And prices will come down substantially. Watch.

The White House has pitched moving drugs covered under Medicare Part B into the popular Part D program. Part B is the bucket of Medicare that covers drugs that are administered in hospital outpatient settings and doctor’s offices, including expensive chemotherapy and rheumatoid arthritis infusions. Insurers compete for business in Part D and negotiate prices for their members, but there is no such price negotiation in Part B. Total drug spending in the Part B program was about $26 billion in 2015, and the upward trend is ominous.

The Outlook:

While providers and insurers are likely to fight it, there’s no reason the idea wouldn’t work, said Tom Scully, the former Centers for Medicare & Medicaid Services administrator who designed the Medicare prescription drug programs in the early 2000s. He worked closely with HHS’ current leader, Azar, who was then general counsel for HHS. “There’s no reason to have Part B,” said Scully, adding that moving the drugs under Part D would require price negotiation. “If you really want to drive down drug prices, you have to put somebody’s money at risk other than the taxpayers’.”

For Medicare, for Medicaid, we have to get the prices way down, so that’s what we’re going to be talking about.

When the White House announced Trump’s forthcoming speech, it also noted that it would coincide with a formal request for information from Health and Human Services on various drug-pricing ideas. The request leaves the door wide open for proposed changes in Medicare and Medicaid. Several experts predict the administration will test payment models through demonstrations under the broad authority of the Center for Medicare & Medicaid Innovation, or CMMI.

The Outlook:

Ideas such as moving drugs to Part D as well as allowing certain states to create drug lists under their Medicaid formularies, as Massachusetts has requested, and other value-based pricing models would be possible under a CMMI demonstration, said Andrea Harris, who leads the health care team at Height Capital Markets. Still, this process could take awhile, and Harris said, “I don’t think anything will meaningfully impact drug-related stocks between now and the midterms [elections].”

Prescription drug prices are out of control. The drug prices have gone through the roof. … The drug companies, frankly, are getting away with murder.”

While there has been no direct proposal that would force the pharmaceutical industry to lower the launch price of its drugs, the industry lost a battle last month when Congress reduced how much seniors would pay for prescription drugs in Medicare. It was a rare loss and signaled that the powerful industry may be in a defensive position. And Trump has another card to play with the Federal Trade Commission.

The Outlook:

Trump has nominated Joe Simons, a Washington antitrust lawyer, to lead the FTC. During his nomination hearings in February, he said he’s “very concerned” with price increases for prescription drugs. The agency, which polices anticompetitive behavior, has several vacancies to fill.

This story also ran on USA Today.
This story can be republished for free (details).

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